Money & Banking

Maharashtra govt may reject RBI’s plan on merger of DCCBs with State co-operative banks

K Ram Kumar Mumbai | Updated on June 19, 2021

Political circles fear that ‘voluntary’ amalgamation could become ‘compulsory’

The MVA Government in Maharashtra is likely to say “thanks, but no thanks” to the Reserve Bank of India for its recent guidelines on “Amalgamation of District Central Co-operative Banks (DCCBs) with the State Co-operative Bank (StCB).”

Though RBI unveiled the guidelines to help the States contemplating de-layering their Short-Term Co-operative Credit Structure (STCCS) and their adoption is voluntary, co-operative and political circles fear that ‘voluntary’ amalgamation could become ‘compulsory’ down the line when it comes to the weaker DCCBs.

Co-operative sector veterans underscored that the Nationalist Congress Party (NCP) and the Indian National Congress (INC), two of the three main constituents of the Maha Vikas Aghadi (MVA), draw their grassroots political power from DCCBs, and the BJP-led NDA Government at the Centre wants to chip away at this.

NCP and INC have a vice-like grip on the functioning of the 31 DCCBs in Maharashtra. Some of their Members of Legislative Assembly and Members of Legislative Council are chairpersons and Directors on the Boards of these banks.

DCCBs mobilise deposits from the public and provide credit to them and the Primary Agricultural Credit Societies (PACS).

Shiv Sena, the third MVA constituent, and the BJP, the main opposition party in the State, don’t have a say in DCCBs functioning.

Three-tier structure

Short-term co-operatives are arranged in a three-tier structure in most of the states, with StCBs at the apex level, DCCBs at the intermediate level and PACS at the grassroots level.

In 10 States and four Union Territories, however, short-term co-operatives operate through a two-tier structure consisting of StCBs at the apex level and PACS at the field level, according to RBI’s ‘Report on Trend and Progress of Banking in India’.

The number of registered insured StCBs and DCCBs stood at 34 and 347, respectively, across the country as at March-end 2021.

As at March-end 2019, there were about 96,000 PACS. These societies interface with individual borrowers to provide short-term and medium-term credit. They also arrange for the supply of agricultural inputs, distribution of consumer articles and marketing of produce for their members.

Amalgamation

The central bank’s latest report said that after RBI’s final approval, 13 out of 14 DCCBs (except Malappuram DCCB) of Kerala were amalgamated with the Kerala State Co-operative Bank on November 29, 2019.

As per RBI’s 2020-21 Annual Report, ‘in-principle’ approval was granted to Government of Punjab on June 8, 2020, for the amalgamation of DCCBs in the State with the Punjab State Co-operative Bank, subject to fulfilment of conditions stipulated by the RBI and additional conditions, if any, imposed by Nabard.

Published on June 18, 2021

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